The benchmark 10-year Treasury yield was flat at 5.004% early Wednesday, staying above 5% ahead of the Federal Reserve’s 2 p.m. ET policy decision.
Fed funds futures priced a roughly 92.5% chance of a quarter-point rate hike, up from 33% a month ago, after inflation data reinforced expectations for tighter policy.
August consumer inflation hit 3.4%, the latest core policy backdrop remained firm with the PCE price index up 3.7% annually in July, while oil stayed above $100 a barrel.
That inflation pressure has weighed on longer-dated Treasurys, leaving the 20-year yield at 5.409% and the 30-year at 5.372% after the 10-year touched a post-2007 high on Tuesday.
Investors are now focused on whether the Fed validates market pricing; some analysts warn a hold could unsettle stocks and raise questions about the central bank’s credibility.